Which of the Following Statement(s)regarding Activity-Based Costing Is (Are)true? I

question 67

Multiple Choice

Which of the following statement(s) regarding activity-based costing is (are) true? I.Use of activity-based costing improves cost tracing by using more cause-and-effect relationships to assign indirect costs to activity centers.
II) An activity-based system is characterized by multiple cost pools and multiple volume and activity cost drivers.
III) Activity-based costing can cause distortion of cost,assigning too much cost to some products and too little to others.

• A) I and III
• B) I and II
• C) II and III
• D) III only

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Definitions:

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific cost object, such as a department or product.

Net Operating Income

A company's gross income minus operating expenses, excluding taxes and interest charges, giving insight into the operational efficiency of the company.

Contribution Margin Ratio

The percentage of each sale that exceeds the variable costs and contributes to covering fixed costs and generating profit.

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific business segment or product.